Question

Exercise 12-8 

Presented below are two independent situations. 

1. Gambino Cosmetics acquired 10% of the 150,000 shares of common stock of Nevins Fashion at a total cost of $13 per share on March 18, 2017. On June 30, Nevins declared and paid a $80,000 dividend. On December 31, Nevins reported net income of $117,000 for the year. At December 31, the market price of Nevins Fashion was $15 per share. The stock is classified as available-for-sale. 

2. Kanza, Inc., obtained significant influence over Rogan Corporation by buying 40% of Rogan's 31,000 outstanding shares of common stock at a total cost of $9 per share on January 1, 2017. On June 15, Rogan declared and paid a cash dividend of $24,000. On December 31, Rogan reported a net income of $85,000 for the year. 

Prepare all the necessary journal entries for 2017 for (a) Gambino Cosmetics and (b) kanza, Inc. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. If no entry is required, select "No entry" for the account titles and enter o for the amounts.) 

Answer 1

No.	Date	Account Titles and Explanation	Debit	Credit
(a)	March 18, 2017	Investment in Nevins Fashion-AFS	195000
		Cash [(10% x 150000) x $13]		195000
	June 30, 2017	Cash (10% x $80000)	8000
		Dividend revenue		8000
	December 31, 2017	Fair value adjustment-AFS [15000 x ($15 - $13)]	30000
		Unrealized gain-OCI		30000
(b)	January 1, 2017	Investment in Rogan Corporation	111600
		Cash [(40% x 31000) x $9]		111600
	June 15, 2017	Cash (40% x $24000)	9600
		Investment in Rogan Corporation		9600
	December 31, 2017	Investment in Rogan Corporation	34000
		Investment revenue (40% x $85000)		34000

Kindly use appropriate account titles nearest in meaning to the ones provided since no list of account titles has been provided.

Answer 2

Kanza, Inc., obtained significant influence over Rogan Corporation by buying 40% of Rogan’s 30,000 outstanding shares of common stock at a total cost of $9 per share on January 1, 2017. On June 15, Rogan declared and paid a cash dividend of $30,000. On December 31, Rogan reported a net income of $80,000 for the year. Prepare all the necessary journal entries on 31st Dec 2017 for Kanza, Inc.?